Increase in mortgage activity not a sign of normal service resuming

‘In essence the market is flat’, says one financial adviser

A cursory look at the mortgage figures released this week by the Banking and Payments Federation of Ireland (BPFI) might suggest that all is well with the property market here or at least that things are getting better.

The umbrella group representing the banking sector made much of the fact that Irish borrowers drew down €14.1 billion in home loans last year, the highest figure since the post-2008 financial crisis.

First-time buyers were, it said, “the single largest segment”, representing 46.8 per cent of the total number of drawdowns in the three months to the end of December last, and also 46.2 per cent of the total value.

Everything the BPFI said was true – obviously – but people familiar with the buying and selling of houses, both in the financial sector and the many thousands of people looking for a place to call home might have looked at those top-line numbers and found themselves asking how things could be so buoyant in the mortgage market when things are so dysfunctional in the actual property market.


Drilling down, it seems clear that rather than the property market bouncing back it remains at best flat.

In the last quarter, drawdown volumes climbed by 0.6 per cent when compared with the same period in 2021, with first-time buyer drawdowns climbing by 2.7 per cent.

The so-called mover-purchaser market actually fell by 3.1 per cent, while people taking out mortgages for investment purposes fell more than 11 per cent to just 220.

By far the most active segment of the market was the switching and remortgaging sector, which jumped by more than 120 per cent year on year.

According to Mark Coan of financial advisers, property price inflation and a massive surge in switchers has accounted for much – if not all – of the surge in activity reported by the BPFI.

“When you look under the hood perhaps things are not quite as they seem,” he told The Irish Times.

He suggested that year-on-year property price inflation accounts for €1.84 billion of the increase in drawdowns – effectively people needed to draw down more money because house prices surged over the course of the year – while the switching market jumped a massive €2 billion to €3.9 million.

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“In essence the market is flat,” he said and almost all of the increase in drawdowns is due to property price inflation and switching.

He said that people had been forced to look at switching as a result of the multiple interest rate hikes imposed by the European Central Bank over the last eight months as well as the decisions by both KBC and Ulster Bank to exit the Irish market.

“A mortgage is one of the largest – if not the largest – monthly expenses that people have and it is going to be something that many people will look at in the middle of a cost-of-living crisis with interest rates climbing,” he said.

Standing back from the numbers of mortgages drawn down and approved and looking instead at the actual buying and selling of houses, it would appear that just over 2,000 more homes changed hands in 2022 when compared with a year earlier, and as a percentage of the whole base the market is still a long way from normal.

And with the ECB set to increase its interest rates again today, and at the stroke of a pen or a keyboard make mortgages more expensive in the short and medium term, a return to anything close to normality might yet be a long way off.

Conor Pope

Conor Pope

Conor Pope is Consumer Affairs Correspondent, Pricewatch Editor